We spent the last three weeks trying to figure out how to buy a house as a non-prof with no money. We are actually pretty close to being able to make it happen. Let me know if you or someone you know might let us hold $200K for a couple months to bridge the gap between closing on a foreclosure auction and finalizing bank financing. Here is some history on the evolving project if you are interested.
We are hoping to buy an historic home in an under-served neighborhood in Durham to repair and develop as a base for community building and resistance to the current investment property/rent seeking model in place. We aren’t looking to turn the property over quickly but to use it as a base of operations for a long term intentional community project. Let me know if you can help or want to be involved.
Sent: Tuesday, August 23, 2016 11:19 PM
Subject: Fayetteville st property update
I’ve sent this or something similar to several people who might be or know someone who might be up for supporting this. I’m not sure what our chances are. They would be better if I were not about to go off grid but I’m not sure staying here would really increase our chances overall. I think we have or will have infrastructure in place to make it all happen if someone jumps in and starts throwing money at us. We have catchers ready and waiting. Ddd has the tools to pull the trigger on the bid. Rrr knows how to properly fill out the forms with our friend in Special Proceedings. I’ll be back on grid to facilitate the cash loan by closing if we are moving ahead.
Rrr is going to do some more research on the house and see what he thinks. I’ll be on the road for the next four days in a driving stupor but in contact. Before I go off grid, we’ll all make contact and have a quick go/no-go decision. Let me know if you have any questions.
Sent: Tuesday, August 23, 2016 11:19 PM
Subject: Urban intentional community opportunity, Durham
We are looking at a house to do an urban community project in Durham. Its sort of a last minute thing because its an auction. I thought the bidding would start at less than 100K but I was off by about half. The house is still worth it but outside of our cash range at the moment. We just need a short term investor who could cover the cost between closing and financing. Here is an email I sent to a friend of mine in NY who might know some people. Do you have any folks who might be interested in this kind of project and lending $200K for a few months just to get it up and running? I’m driving to Nevada tomorrow for the Burning Man pilgrimage but I’ll be online for the next four days to facilitate this project if you can think of someone who might want to jump in. Give me a call
Hope you are well.
Sent: Tuesday, August 23, 2016 11:19 PM
Subject: Fayetteville St Property
So, Ddd and I went to the pre-forclosure auction today for 1211 Fayetteville St. One of the three partners for the firm with the sign on the door at the house showed up but did not participate, just observed. The owner did not show up and did not redeem his mortgage. I would have bid on the auction but I dodn’t have financing secured and the opening bid is more than I can do with cash right now. The opening bid was $177,600. Since no one bid on the house, the auction enters a 10 day upset bid period. The bid increment during the upset period is 5%. If someone submits an upset bid, the 10 day upset period starts over until there are no more upset bids.
If we bid on the house at this point, the next bid increment is $186,480.
Our friend is on board and confident he can secure a mortgage and finance the project. I can cover the 5% cash deposit for the bid ($9,324). The auction is considered a cash sale and requires fulfillment of the payment at closing. Unfortunately, we cannot secure a mortgage and construction loan until after closing. So, we need about $200K cash for a short term loan to bridge the gap between closing and mortgage which should be 2-4 months. Here are some possible outcomes.
Optimal… I put up the deposit, someone lends us $200K bridge loan, Ryan gets the mortgage, we spend 6-9 months on repairs and raising money. We rent space to a suitable non-prof or 2 for the downstairs apartment. We live in/run Wildflower Community Organization (WFCO) out of the upstairs apartment. have enough money in two years to pay the director and have enough money in 5 years to pay off the mortgage. WFCO gets off the ground, short term lender makes a little money, Ryan makes a little money, I get my money back. Everyone feels good about themselves and each other and we make the world a better place…
Sub optimal… We run into a problem getting the mortgage and the short term investor doesnt immediately get their money back.
Really sub optimal… We cant get a mortgage. We have a really frustrated short term investor and have to put all our energy into fundraising so we can take an old house off their books instead of putting our energy into fixing up the house.
Catastrophic… Everyone gives the project a green light but someone backs out at the last minute. I loose my whole savings on a non-refundable deposit. The auction broker comes after me for the balance of the bid and ruins my credit and life for a while. We all stop talking to each other and the world is not better.
– We decide this isn’t the best idea and walk away. I go back to Guam and tie up my loose ends there and come back to try a similar project next year
I learned all about title searches sans lawyer today. I got to meet the clerk of court who was super nice and showed me how to figure out that Mr Smith, the guy on the deed, owes the IRS $90K. He’s paid off a bunch of other debts recently but got underwater when he got a divorce. I also went to the Register of Deeds where they showed me how to search their database where I put together a complete timeline of Mr Smith’s real estate transactions since 1995. He has some other properties that he looks like he might be underwater on but there are no outstanding liens I could find on the 1211 Fayetteville St property. The property was deeded to him by Mr Bullock, one of his business partners and he has borrowed money from Mr Bullock but I dont think the Bullocks have any lien on the property or it would have shown up at the Clerk of Court. We also reviewed the foreclosure proceedings folder at the special proceedings office. The foreclosure auction had been delayed and postponed several times but it proceeded as scheduled this morning.
I have walked around the outside of the property a couple of times. I have not seen anything that is alarming about the structure of the house. There is nothing that immediately makes me think the foundation might have problems or that the roof is structurally unsound. It is old and not in the best repair. There are shingles missing and fascia boards have been removed from/fallen off the eves. There are stacks of new windows in the large open room downstairs so someone was planning to replace a lot of the windows. I’m a civil engineer with a masters in construction mgt and pretty good hands on experience. From what I can see it looks like a totally doable project. That said, I’ve never been in the house or seen the electric or HVAC and cant speak to those potential costs so cant even give a wag at what repairs might cost but someone was in there before us and thought it was a good idea and was making progress when they got a divorce and the wheels came off…
So, we need some cash to get started but just for a minute. Let me know if you or someone you know want to lend us $200K for a few months and be involved with this community building experiment. The risk is pretty low for the short term investor.
If this falls through, its been a really interesting adventure and I’ve learned a lot. We’ve put a bunch of infrastructure in place in three weeks to support this kind of project. I’m excited to work with everyone who’s going to see this and I’m happy to be on this ride with you. Thanks for all the time and effort everyone has put into this already: sitting and talking, sharing ideas, pointing out warning signs, sage advice, encouragement, etc.
President, O8 Property Management LLC
Interim Director, Wildflower Community Organization
Sent: Monday, August 22, 2016 3:40 PM
Subject: 1211 Fayetteville St
Thank you so much for talking with me the other day about buying old houses and the real estate landscape in Durham. You brought up some great points that I hadn’t fully considered. I still think I am uniquely qualified to make a project like that work on a shoestring budget but so does every other clown who jumps into a project like that…
The opening bid for 1211 Fayetteville St just posted at $177,600.
Based on similar properties recently auctioned in the same neighborhood we were thinking it would be closer to $85-90K. $177K is outside of the range we can do with cash. If nobody bids on it and it goes back to the bank we might get another shot at it down the road.
Know anybody who wants to bankroll a communal housing project? Its not likely to make money but with aggressive fundraising should be able to payback a $150-200K loan in 6 to 8 years. (e.g. not a “smart” investment) Its a super cool house and could be the cornerstone of a really neat capacity/neighborhood integrity building experiment. There will probably be other opportunities in the same neighborhood to do similar projects cheaper but not with the same architectural significance. The auction starts tomorrow with a 10 day upset period. So, we would have until next week to get some cash together if we still want to pursue it. If I had the money, I would probably bid up to the appraised value of $193Kish before walking away. I’m still planning on my trip to the west coast unless someone tells me today they want to try to make it work. My brother has a friend who was interested before but I’m not sure of his position with the new information.
Thank you for taking time to sit and talk with me about this project even though it doesn’t look very promising at the moment. Please keep an eye out for similar projects in the same neighborhood for the future.